As shares of Activision plummet on Friday, shares of the New York-based Take-Two are rising modestly, reflecting market confidence in the company's
"Buy. I think of all the gaming stocks, [Take-Two] is the best. I'm saying buy, buy, buy," Jim Cramer commented on Mad Money, noting that the company's success with Red Dead Redemption 2 has catapulted it to best in class status.
He added to that view in his "Stop Trading" segment on CNBC, advising against taking positions in Activision as the noise around the company dropping Destiny and losing executives settles while highlighting the gains available for Take Two traders.
Analysts have picked up on the company's key releases as accelerating its growth at a faster rate than its key competitor, citing the soaring success of Red Dead in the key holiday readout.
"Despite the challenging competitive landscape this holiday season, Red Dead remains the top-selling console game, supported by strong early feedback from critics and players," Baird analyst Colin Sebastian said. "While Rockstar continues to work through some minor issues with the online beta, we believe there is upside to third quarter estimates based on unit sell-through and early signs of online engagement and monetization."
Given the positive numbers already flowing in and non-cannibalistic portfolio diversification, Baird upped their estimates for the coming quarterly report, with Sebastian setting his price target at $145 per share while assigning an "Outperform" rating for the stock.
The analyst adulation and strong consumer reception and sales for its newest games bode very well for the company s it seeks to find further room to run in coming weeks.
By contrast, Activision's quarterly report is expected to be tremendously noisy with Destiny's departure adding to concern about executives fleeing to Netflix NFLX and Square SQ as well as a lagging pipeline of products to keep the ship sailing straight.
The departure of the historically profitable franchise comes after reports of discord between Destiny developer Bungie's team and Activision's vision for the franchise and Activision falling out of touch with its core customers.
Guardians make their own fate— Luke Smith (@thislukesmith) January 10, 2019
The second installment in the franchise was noted by Activision's management to be unprofitable and thus immaterial to numbers, but many have noted that it was actually Activision's fault as its increasing push of in-game purchases actually pushed its huge user base away from the game.
Gamers on video game forums have erupted at news of Bungie's departure and unfortunately for Activision, it has been almost universally in celebration of the company's freedom from the perceived "out-of-touch" nature of Activision's corporate management.
One need only look at Twitter replies to Activision's announcement of the split to see the dichotomy in the perception of Bungie and Activision.
Thank you Guardians. It's been an honor and a privilege to help bring the world of Destiny to life for you. pic.twitter.com/EB1y19OTD8— Activision (@Activision) January 10, 2019
"With Forsaken, we've learned, and listened, and leaned in to what we believe our players want from a great Destiny experience," the Destiny development team said in a blog post after the announcement, speaking to the issue.
The implication now is that the problem was not with Bungie or the game. It was with Activision and that is a persistent problem.
So, while Activision Blizzard has long been touted as the key stock to play the secular shift toward gaming and eSports culture, the company will need to find a way to retain the executives, developers, and most of all the consumers that keep that thesis alive.
For now, Take Two appears to be capturing those hearts and minds.